In the pandemic environment, our individual health can’t be separated from our collective health. It’s clear that our path to recovery largely depends on COVID vaccination progress, notes Genia Turanova, editor of Curzio Research's Unlimited Income — and a participant in MoneyShow's Accredited Virtual Expo on March 2-4. Register for free here.
Because the COVID-19 virus mutates and is highly contagious, countries all over the world are likely to vaccinate people annually, just like we do for the flu — or keep vaccines in stockpiles in case of another outbreak.
And this has one important investment implication: everything COVID-related — from making the vaccines to producing the means of storing and administering them — is unlikely to be a one-time expense for the world.
Rather, this will be an ongoing process for the healthcare industry and an ongoing business for companies involved. And it’s a good bet that the current leaders will continue to benefit.
One such company is Corning (GLW). This king of glass, known for the Corning, Pyrex, Gorilla Glass, and other branded products, has been involved in vaccine manufacturing because of its expertise in glass and ceramic science… manufacturing capacity… and history of creating the best glass for the job.
To fight COVID, Corning has contributed new technologies—from manufacturing consumables to helping large pharma develop treatments and vaccines… to making specialty glass for vaccine production.
And it owns the newest glass there is — one specifically designed for pharmaceutical applications. It’s called Valor Glass. Valor Glass has the rare distinction to be the first pharmaceutical glass composition to be approved by the Food and Drug Administration (FDA) in more than 100 years.
Approved in October 2019, Valor glass has become one important weapon in fighting COVID. Early last year, Corning entered a long-term supply agreement to provide Valor Glass vials for Pfizer’s already-marketed drugs.
On top of that, the U.S. government awarded Corning $204 million to substantially expand domestic manufacturing capacity for Valor vials.
Today, Corning is supplying Valor Glass to several leading COVID vaccine manufacturers. The company has already shipped enough Valor vials for more than 100 million doses.
Mass testing is another activity that isn’t likely to go away anytime soon. Corning has a hand in the testing technologies as well via its consumable products, and the company received $15 million from the U.S. government to expand domestic capacity for robotic pipette tips, which are used for COVID diagnostic testing.
For the full year 2020, as well as Q4, Corning’s best-performing division was Specialty Materials. The division’s full-year revenue actually grew by 18% in 2020 (to $1.9 billion), thanks to strong demand for premium cover materials, semiconductor materials, and other IT products.
Back in 2019, the best-performing division was Environmental Technologies, with its 16% revenue growth. In 2020, full-year revenue for this division declined by some 9%, although by the end of the year it returned to growth as well.
One of the leading trends benefitting this division is the need for cleaner air… the growing demand for filters and other pollution-reducing products. This is part of what makes the automotive division a growth-oriented one.
The Optical Networks business, where growth depends on telecommunications companies and cloud providers spending more money, is likely to even accelerate into 2021 — and especially into year-end as we see more and more fiber optics and data center spending related to the growth of the cloud. We could also see additional demand here if the Biden administration’s infrastructure plans come to fruition.
Corning’s Display business accounts for some 30% of the company’s revenue and 40% of net income. This business is leveraged to consumer spending: it makes TV and computer monitor glass.
A stronger consumer, supported by stimulus checks early in 2021, and the recovering economy later in the year, means the retail demand for TVs, smartphones, and other electronics will only accelerate.
In sum, the company is going to ride several growth trends for 2021 and beyond: There’s strong, growing demand in vaccine vials… optical communications… environmental protection (both here and in China, where new regulations have been enacted)… and electronics.
We can pick up Corning for a relative bargain. Based on next-year earnings, it’s valued at a P/E of about 18.6 times (18.6x) — much cheaper than the market’s 22.2x — and significantly cheaper than it was a year ago. Plus, the stock pays a 2.45% yield (vs. the market’s 1.6%).
